By Sumarbin Umdor
The Rajuram Rajan Committee report has recommended a new method for allocation of funds by the centre to states based on the state’s development needs and performance. This will do away with the special category status that states like Meghalaya enjoy at present. The recommendation of the committee has been strongly contested by one of the members of the committee and also by other economists who have pointed serious flaw in the used of the variables and on the methodology adopted to prepare the composite development index. This index prepared by the committee does seem unconvincing even to ordinary people, as prosperous states like Gujarat finds itself in the same league with Manipur and Nagaland. May be this is reasons they say that if you torture data long enough, it will admit to anything.
Coming to Meghalaya, the state finds itself being categorized as ‘Least Developed’ along with nine other states in the new index. This is no surprise, as the state of development of Meghalaya or rather the lack of it has also been reflected in similar surveys where the state figures in the bottom ranking with other Indian states. Ironically the least developed tag is good news for the state as it would mean continued access to more funds from the centre, but on the other hand, the new allocation method proposed by the committee would lead to decline in the state’s share of central funds compared to the present method of allocation.
On the basis of 0.65 percent allocation for central funds recommended by the committee for Meghalaya, the state would have received about Rs. 450 to Rs. 500 crore less than what it received from the centre in 2011-12. For a resource poor state like ours, even a small decrease in central funds would lead to serious impact on the state finances. In order to appreciate the implications of the recommendations for Meghalaya we need to first look at the present fiscal arrangement for central transfers to special category states.
Although there is no special treatment of special category states in the devolution of central taxes, such states have been recipient of higher per capita grants from the successive Finance Commissions. In the case of plan assistance, special category states receive 30 per cent of the total normal central assistance although together these states account for about five to six percent of the country’s population. Further, the centre provides 90 percent of the plan assistance to these states as grants while for general category states the ratio is 30 percent grant and 70 loans. For externally aided projects, the external assistance is transferred as additional central assistance to special category states on a 90:10 grant and loan basis, while for non special category states the external assistance is transferred to them on the same terms and conditions on which the it was received from the external agencies with the service cost and exchange fluctuations passed on to the general states. Besides the above, northeast states enjoy additional access to 10 per cent of plan budget of all central ministries from the non lapsable central pool of resources and also access to special plan schemes from NEC. According to DoNER the total plan investment by the centre to northeastern states in the Tenth Five Year Plan was a staggering amount of Rs. 80,000 crores. In 2006-07, the per capita central assistance for state plan for northeastern states was Rs. 2241 compared to Rs. 570 for the non-special category states. As this funding pattern continues, northeastern states are receiving highest per capita level of central assistance among states in India.
Now let us look at how the special funding for special category states translates in terms of actual flow of central fund to Meghalaya. 77 percent of the Rs. 4261 crore of revenue receipts of the state in 2011-12, came from the centre in the form of central transfers- share of central taxes, plan and non-plan grants- with the state own revenue contributing Rs. 1066 crore. In the same year, the expenditure only on salary and pension of state government employees was Rs. 1947 crore with Rs. 1571 going towards salary and Rs. 376 crore for pension.
This means that the state own revenues could meet only 55 percent of the salary and pension expenses. For annual plan of 2013-14, Meghalaya stands to receive 70 percent of required resources from the centre as grants, while Bihar one of the poorest states in the country will be receiving only 23 percent central assistance for its annual plan during the same year. However, even with this liberal infusion of central funds the expenditure on capital assets is only at 15 percent due to high revenue expenditure.
Given that the state has limited resource mobilizing ability but high revenue expenditure, it would be expected the state government will utilize the central funds to their fullest to bring about speedy development of the state. Review undertaken by CAG of some important central flagship programmes in the state however, show a different picture -a significant shortfall in the achievements under various schemes. For example, the shortfall in the number of new houses constructed under IAY was 45 per cent and 41 per cent in 2008-09 and 2009-10 respectively. Construction of rural roads under PMGSY in 2010-11 and employment generated under MGNREGA in 2008-09 was 35 and 42 per cent below respective target. In the AIBP the shortfall has worsened during 2009-10 to 2010-11.
Similarly in 2010-11 only 31 per cent of the targeted BPL households were provided connection under Rural Electrification schemes. The performance of the SSA scheme in 2010-11 was very dismal with only 18 per cent of the new schools constructed as against target. Similarly, the performance of NRHM and MDMS also show a considerable shortfall between the achievements and targets. CAG has pointed out to several factors responsible for the dismal performance in the implementation of CSSs in the state. These include improper implementation of schemes, irregular fund flow to implementing agencies, misuse and misappropriation of funds, absence of proper monitoring and supervision mechanism, non-completion and delay of completion of schemes and poor quality of work.
The delay and cost overruns in implementation of key infrastructure projects such as the Myntdu Leshka project and Greater Shillong Water Supply Schemes are two prime examples of everything wrong with our ability to implement key infrastructure projects and our dismal failure in prudent utilisation of public resources. There is another related issue which is the deterioration in the quality of public goods and services in the state. This can be felt by travelling the roads in and around Shillong. Crater size potholes litter the roads of the Capital and are a severe indictment of the utter lack of stewardship and accountability in the utilisation of public funds. Of concern is the fact that while infrastructure and public services are improving across India, the reverse is happening in Meghalaya.
A colleague of mine has very aptly described the manner in which development has come to be understood and accepted in the state and region. According to him ‘development in the region is all about money coming from Delhi and being siphoned off by the institution of contractors and administrators with very little visible change on the ground’. This perspective of development has to change and we must put a stop to the culture of wanton pilferage and wastage of public resources if we ever hope to come out of this ignominious branding of a least developed state.
(The author teaches Economics at North Eastern Hill University)